Scottsdale Ins. Co. v. Calhoun Hunting Club & Lounge
360 F. Supp. 3d 1262
M.D. Ala.2018Background
- 2016 shooting at Calhoun Hunting Club: security guard shot into a car; Nakia Rivers died and Tiffany Miller (driver) sued the club and owner Terry Baity in Alabama state court for emotional distress, property damage, and punitive damages (no physical injuries alleged).
- Scottsdale Insurance Company had a commercial-liability policy with a $300,000 aggregate limit and already paid the full $300,000 to Rivers’s estate to settle those claims.
- After that settlement, Scottsdale filed a federal declaratory-judgment action seeking a declaration that it had no further duty to defend or indemnify the club or Baity in Miller’s state suit.
- Baity and Miller moved to dismiss for lack of subject-matter jurisdiction on diversity grounds, arguing the amount in controversy did not exceed $75,000.
- Miller represented and stipulated she will limit her state-court recovery to $50,000; Scottsdale challenged whether the policy face value, expected defense costs, or punitive damages should push the controversy over $75,000.
- The district court found Scottsdale failed to prove by a preponderance that the amount in controversy exceeded $75,000 and dismissed the case without prejudice for lack of subject-matter jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Amount-in-controversy for declaratory relief | Use policy face value ($300,000) as measure of plaintiff-insurer’s stake | Only the value of Miller’s claims (and defense costs) are in controversy, not the full policy | Held: Face value not controlling because policy validity not disputed and underlying claims do not exceed limits; measure is value of Miller’s claims plus provable defense costs |
| Inclusion of expected defense costs | Defense costs should be added to amount in controversy | Defense costs speculative without concrete evidence | Held: Scottsdale failed to prove defense costs by preponderance; court will not speculate |
| Value of Miller’s claims (emotional distress, property damage, punitive) | Past Alabama awards for emotional distress show potential >$75,000; punitive damages also available | Miller stipulated to limit recovery to $50,000; no physical injuries; punitive damages excluded from Scottsdale’s coverage | Held: Court credits Miller’s binding stipulation to $50,000 and excludes punitive damages from insurer’s interest; Miller’s claims do not meet $75,000 threshold |
| Citizenship and identity of Calhoun Hunting Club | Scottsdale: club is distinct defendant | Baity: club is sole proprietorship and same as Baity; Baity appears served individually | Held: Under Alabama law sole proprietorship and owner are the same; court treats motions as applying to club and dismisses as to club too |
Key Cases Cited
- Burns v. Windsor Ins. Co., 31 F.3d 1092 (11th Cir. 1994) (federal courts are courts of limited jurisdiction)
- Federated Mut. Ins. Co. v. McKinnon Motors, LLC, 329 F.3d 805 (11th Cir. 2003) (party invoking diversity for indeterminate damages must prove amount-in-controversy by a preponderance)
- Stonewall Ins. Co. v. Lopez, 544 F.2d 198 (5th Cir. 1976) (value of declaratory relief to insurer is potential liability under policy, including defense costs)
- Friedman v. New York Life Ins. Co., 410 F.3d 1350 (11th Cir. 2005) (policy face value controls only where validity of policy or coverage for claims putting face amount at issue)
- Hartford Ins. Grp. v. Lou-Con Inc., 293 F.3d 908 (5th Cir. 2002) (policy limits do not automatically determine amount in controversy absent dispute over policy validity or claims exceeding limits)
- Hertz Corp. v. Friend, 559 U.S. 77 (2010) (corporation’s principal place of business is its nerve center for diversity purposes)
- St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938) (plaintiff’s allegation of amount in controversy taken as true unless legal certainty otherwise)